Afghan IG wants closer ties with contractors

By Richard W. Walker

Feb 20, 2014

While the U.S. combat mission in Afghanistan is scheduled to end this December, reconstruction operations supported by government contractors in that country will continue for “the foreseeable future,” John Sopko, special inspector general for Afghanistan reconstruction (SIGAR), said this week.

With more than $20 billion of appropriated reconstruction funds still in the pipeline, SIGAR will have an important mission and work to do for some time to come, said Sopko, speaking to government contractors at a lunch in Arlington, Va., sponsored by the Professional Services Council.

“The good news for you, with that $20 billion in the pipeline, is that many of your companies are likely to continue operations in Afghanistan for the foreseeable future,” he told PSC members. “In fact, reconstruction will be even more important post-2014 from a national security perspective since it will be our nation’s primary means of ensuring Afghanistan never becomes a haven for terrorists meant to cause us harm.”

Moving forward, it will be crucial for SIGAR to maintain and expand a dialogue with contractors working in Afghanistan to develop “a valid body of lessons learned” to apply to future reconstruction programs, he said.

“My work on the hill as well as my experience practicing law have [deepened] my deep interest and desire in listening to, and where appropriate, working with the contracting community to improve operations of our government,” said Sopko, former chief counsel for oversight and investigation for the House Committee on Energy and Commerce.

“You know more about contracting than we do, and you definitely know more about contracting than a number of government agencies do,” he said. “We need to tap into that. We’re interested to learn about your successes, your in-country challenges, impediments to your doing a good job and suggested improvements for future reconstruction efforts.”

Sopko said that SIGAR would like to begin working with the contracting community on developing a framework for collecting lessons learned.

“We would be receptive to receiving not-for-attribution comments or otherwise protecting the confidentiality of our sources,” he said.

He cited recent legislation to address illegal taxation by the Afghan government as an example of how SIGAR and the contracting community have worked together successfully on a government contracting issue in Afghanistan.

“In 2012 the contracting community brought its concerns to us about the Afghan government illegally taxing their operations in Afghanistan,” Sopko said. “I personally raised the issue with the U.S. embassy in Kabul, with [the International Security Assistance Force] and the office of the special representative for Afghanistan in Pakistan, and I can tell you that they and others in Kabul did not want to hear what we were saying. They initially said there was no problem, ignore it.”

But during a visit to Afghanistan he met with industry representatives about the problem and even witnessed deliveries of fuel at a border crossing being held up by the Afghan Finance Ministry over “bogus taxes.” A subsequent SIGAR audit report found that the ministry of finance had levied more than $9 million in business taxes and associated penalties on 43 U.S. contractors supporting reconstruction programs.

SIGAR recommended that the U.S. government develop a consistent position on the appropriate taxation of contractors and also urged Congress to seek reimbursement. As a result, Congress included a requirement in the 2014 National Defense Authorization Act that the Defense Department withhold assistance for Afghanistan in an amount equal to the total of all taxes assessed by the Afghan government on assistance provided by DOD.

Sopko also said that another area of “common concern” with contractors is protecting direct, government-to-government assistance to ensure that funding doesn’t “go to undeserving friends and cronies” of Afghan government officials. The U.S. government, along with other international donors, has committed to channel at least 50 percent of its development assistance through the Afghan national budget, rather than through contractors and nongovernmental organizations operating on behalf of the U.S. government.

“In SIGAR’s view, steps must be taken by USAID, DOD and the international community to reduce the risk of theft or misuse of taxpayer funds provided through direct, government-to-government assistance,” he said. “I believe that the issue of direct assistance will be extremely important to you in the contracting community. Some of you will be called on to assist the donor community in assessing, planning and developing strict safeguards to protect to those funds. Without such safeguards in place, many of you and your companies will face competitive disadvantages where Afghan ministries hire unqualified contractors based on cronyism and corruption with U.S. taxpayer dollars.”

Congress created SIGAR, an independent, free-standing agency, in 2008 to provide tougher oversight for U.S. reconstruction programs in Afghanistan. It is the job of SIGAR’s nearly 200 auditors and investigators, including more than 50 staffers on the ground in Afghanistan, to protect the massive U.S. investment in reconstruction, Sopko said.

SIGAR is also a temporary agency. Its mandate will expire when the amount of unexpended reconstruction funds fall below $250 million, he said. As of January 2014, Congress has appropriated more than $100 billion for Afghan reconstruction, making it the most costly effort to rebuild a single nation in the history of the United States.

Sopko said he fully appreciates the significant contributions that contractors have made to the reconstruction effort.

“Contractors working shoulder-to-shoulder with the U.S. military and civilian personnel make significant sacrifices and put themselves at great risk,” he said. “Sadly, many have made the ultimate sacrifice.”